U.S. Federal Deficits, Presidents, and Congress

Stephen Bloch

Last update: Oct 11, 2016
Numbers for Sept 30, 2016

Some time in early 2004, I ran across a
Web site
maintained by the Department of the Treasury, listing the U.S.
National Debt year by year since 1791. The numbers by themselves
are too big to be meaningful, so I put them into a spreadsheet to
see if I could extract any interesting trends and patterns.

In particular, I wanted to be able to compare the effects of
government policies under different Presidents and Congresses on
budget deficits. This sort of comparison will inevitably have
political implications, so I resolved to make the page as transparent
and fact-based as possible: if you don't like my conclusions, here
are the data and you can replicate them yourself. I was concerned
about (conscious or unconscious) political bias, so I wanted to
avoid any sort of sophisticated analysis that required lots of
judgment calls. But some judgment calls are unavoidable.

Which President or Congress?

One issue is to which President or Congress a particular year's
deficit should be attributed. U.S. Congressional terms start on
Jan. 1, Presidential terms later in January, and the fiscal year on
Oct. 1, so none of them exactly match up. Since most Presidential
and Congressional actions take months to be implemented, much less
to show a measurable effect on the debt, I decided that the fiscal
year spanning a change of (Presidential and/or Congressional) terms
would be counted as belonging to the outgoing President and
Congress.

How to define "deficit"?

Another question was how to define the word “deficit”.
In trying to keep things simple and transparent, I chose “one
year's national debt minus the previous year's national debt”.
But even that simple definition doesn't entirely resolve things.

Which national debt?

The Treasury reports three numbers: "Public Debt",
"Intragovernmental Holdings", and "Total Debt", which is the sum of
the other two.
The difficult question is whether to use "Public Debt" or "Total Debt"
in the data analysis.
The question is made easier by the fact that "Public Debt" and
"Intragovernmental Holdings" weren't
reported until 1997, so if I want to cover history
farther back than 1997, I have no choice :-)

Intragovernmental debt, as I understand it, is mostly
Treasury bonds held by the Social Security and Medicare trust funds,
which are part of the Federal government in a sense, but there are legal
walls between them and the Treasury. When you pay $1 of Social Security
tax, your dollar goes to the Social Security administration, which promptly
transfers it to the Treasury in exchange for bonds.
The whole transaction has increased intragovernmental debt by $1, while
giving the Treasury $1 and thus reducing
the public debt by $1 from what it would otherwise be. When you draw a
Social Security check, the process is reversed: the SSA sells bonds back
to the Treasury in exchange for dollars, thus reducing both the
intragovernmental debt and the Treasury's liquid assets by the same
amount. In short, Social Security and Medicare taxes and payments
affect the "public debt" and "intragovernmental debt" but have no effect
on the "total debt". So if I want to ignore the effects of Social
Security and Medicare, "total debt" is the right figure to use.

How to adjust for inflation?

I wanted to adjust for inflation so one could meaningfully compare
deficits from more than a few years apart. Originally, I used the
formula

(debt in year X) - (debt in year X-1)
-------------------------------------
(CPI in year X)

Then an economics-professor friend of mine pointed out a problem
with this. Suppose the national debt is a trillion dollars, and
the inflation rate is 10%. If the government spends exactly as
much as it takes in this year, the national debt will still be a
trillion dollars, but those dollars will be 10% less valuable a
year from now; the nation is less deeply in debt than before,
because it's easier to pay off the debt with inflated dollars.

To look at it another way, part of any year's
government expenditures is interest on the national
debt, paid at a rate that must normally be higher than inflation
(or nobody would buy the bonds).
So suppose we want to compare two governments: each
inherits a $1 trillion national debt, and each spends exactly
as much as it takes in, aside from interest payments, but one
of them has 0% inflation and the other 10% inflation.
All else being equal, the latter will have to pay 10% higher
interest rates to bond-holders. So of these two governments,
the latter shows up as having a $100 billion larger deficit
than the former, even though both are in some sense equally
fiscally responsible and this $100 billion increase in nominal
debt is cancelled by inflation.

So as of Oct. 2013, I'm calculating deficit as

(debt in year X) (debt in year X-1)
---------------- - ------------------
(CPI in year X) (CPI in year X-1)

Note that if there was no inflation in year X, this produces the
same answer as the previous formula; in the presence of inflation, it
produces a smaller number, and when there's deflation, it produces a
larger number.
The old version of the page, before this revision,
is here.

What I did

Tabulated the national debt by year, back to 1911. (I
originally went only back to my birth, in 1964, but then
expanded the chart to 1911, stopping there because I ran out of
CPI data.)

Adjusted these debts by the
Consumer Price Index as of
the end of the fiscal year to get a debt in constant (1983) dollars.
(There's nothing magical about 1983, except that CPI figures are often expressed
in 1983 dollars. If I used, say, 2006 dollars, all the numbers would be
about half as large, but the shape of the curve would be exactly the same.)

Subtracted each year's constant-dollar debt from the next year's,
as a measure of one-year federal deficit (including interest paid).

In 1977, the reporting date shifted by 3 months, so that
"year" was actually 15 months long; I multiplied the deficit in this
year by 4/5 to give an annualized figure. I did something similar for 2012-2013,
2013-2014, 2014-2015, and 2015-2016, which were distorted by debt ceiling
standoffs; see below.

Annotated each year by the party of the President and the
majority party in each house of Congress (see House
history and
Senate
history). Many years show a transition from one party to another.

Also annotated each year with the top-bracket individual
marginal Federal income tax rate for returns filed that year
(i.e. on the previous year's income), drawn from
The
Tax Foundation. This is an oversimplification, of
course, since it doesn't say where that top tax bracket starts:
for example, in 1992 the top tax bracket was 31% on income above
$86,500, and in 1993 it was 39.6% on income above $250,000, but
somebody who earned $125,000 in each of those two years would
have seen almost no change. More dramatically, in 1941 it was
81% on income above $5 million, and in 1942 it was 88% on income
above $200,000; somebody earning $250,000 in both years would
have seen a marginal tax rate rise not from 81% to 88% but
rather from 71% to 88%.

Note that it's hard to ascribe cause and effect here:
for example, when a war starts, tax rates and deficits usually
both go up, but it would be hard to claim that one is because of
the other; in fact, both are because of the cost of the war.

I haven't done much analysis
of the Congressional data yet: I'd like to see whether party control of
the Senate makes a consistent difference, whether party control of the House
makes a consistent difference, whether the margin of control
(e.g. 51% as opposed to 69%) makes a consistent difference, whether
having the House and Senate controlled by the same party makes a
consistent difference, whether having one or both houses of Congress
controlled by the same party as the President makes a consistent
difference, etc. But the data are there: perhaps somebody else will do
that analysis for me :-)

These are the data from which all of the following tables are drawn, organized by year
so you can draw your own conclusions about Presidents, Congresses, tax
rates, etc.

The inflation-adjusted debt (seventh) column is simply the public debt expressed in 1983
dollars.

The deficit (eighth) column is the difference between one year's inflation-adjusted debt
and the previous year's (annualized in years that for various reasons
were longer or shorter than 12 months).
I display this both as a number and as a bar-graph.

Comments on Table 1:

The largest one-year deficit in history was in fiscal 2008-2009, in
the trough of the recession and the peak of TARP and stimulus spending
intended to end that recession. Deficits decreased rapidly for the next
two years as TARP loans were repaid and temporary stimulus ended, and have
alternately grown and shrunk since then.

The figures for 2012-2013 were complicated by a political
debt-limit dispute. The nominal national debt typically varies
by ± $10 billion from one day to the next, but from June 1
to Sept 30, 2013, the day-to-day variation was 100 times smaller,
as the Treasury used "extraordinary measures" (i.e.
shuffling money from account to account) to stay just below the
limit and avoid default. On Oct. 17, 2013, after the debt-ceiling
deal, the official debt figure jumped by $328 billion in one day,
presumably "unwinding" these "extraordinary measures", and then
returned to its normal ± $10 billion/day variation.

The same thing happened in 2014-2015: from the end of February, 2015
to the end of October, the national debt varied by less than $5 billion,
then jumped by $340 billion on Nov. 2, the day Congress increased the debt
limit, and by the end of November it had grown by another $335 billion.

These two standoffs are visible as "flat lines" in the following
graph, each followed by a jump back to the pre-standoff trend line.

In both cases, the end of the fiscal year fell in the middle of a
flat-line, so using the official debt on that day would produce an
artificially low number. So I'm interpolating linearly from the debt a
month or two later, once the debt ceiling was lifted: I treat 2012-2013
as 13 months long, 2013-2014 as 11 months long, 2014-2015 as 14 months
long, and 2015-2016 as 10 months long.

Graph: Real Debt, 1911-present

The following graph shows the "real" (inflation-adjusted) national
debt over the past century. This measures
"how much consumer goods would it take to pay off the debt?"
A “sustainable” budget is one in which it doesn't get harder
to pay off the debt -- in other words, inflation-adjusted deficits and
surpluses balance one another over a number of years.
Sometimes (e.g. 1998-2001 and 1978-1981),
the national debt grows in nominal dollars,
but actually becomes easier
to pay off because inflation has made those dollars "smaller".
I've put the graph on a log scale, so (for example) a 10% growth
in 1941 looks the same as a 10% growth in 1915.
(The vertical scale is labelled in 1983 dollars; if we used a different
base year, the graph would look exactly the same except for the numbers
on the vertical scale.)

Note the spikes for World Wars I and II, the upward slope for the
Great Depression, and the remarkable flat line
from 1946 to 1981, during which time real national debt varied by less
than 25%. (This differs from the flat lines in the previous graph: the
nominal debt grew by a factor of four in these 35 years, but
the inflation-adjusted debt held steady, so this flat-line
represents a real phenomenon, not a temporary reporting dodge.)
In other words, the Federal government had a
“sustainable” debt for 35 years,
as years of surplus almost exactly balanced years of deficit.
But in the 35 years since 1981, the real debt has grown by a factor
of seven, shrinking in only three of those years.

Analyses by President

I then grouped the data by Presidential administration.
As mentioned above, I consider the fiscal year
spanning a Presidential election and inauguration to be part of the
outgoing administration.
This is usually a fair assumption,
because most government programs take a while to start, and last for
multiple years. Fiscal 2008-2009 is perhaps an
exception: both the
outgoing and incoming Presidents signed expensive economic-stimulus
programs designed to take effect immediately. Accordingly, in
the following tables, I've given George W. Bush
two rows in the table: one for his whole term, consistent with all other
Presidents, and one counting only his first seven years, ending with the
figures of September 2008, by which time a recession had started but the
government measures to deal with it hadn't been enacted yet.

After deciding on those conventions,
there were still several different reasonable ways to look at the data.

Table 2: The Top Ten Deficit Years

I have in my hand a copy of tonight's Top Ten list....

2008-2009, at $933 billion (G.W.Bush)

2009-2010, at $694 billion (Obama)

2011-2012, at $424 billion (Obama)

2012-2013, at $403 billion (Obama)

1943-1944, at $361 billion (FDR)

2014-2015, at $353 billion (Obama)

1942-1943, at $337 billion (FDR)

2010-2011, at $310 billion (Obama)

1944-1945, at $287 billion (FDR)

2015-2016, at $272 billion (Obama)

Again, all of these numbers are in inflation-adjusted (1983) dollars.
I don't include "partial" years of 6 months or less.

How much did the annual deficit shrink or grow?

I subtract the deficit in a President's first year from the deficit in the
year after that President stepped down (or, in the case of the current
President, from the most recent deficit figures I have). This change in
deficit is then divided by the number of years it took to achieve it.

Comments on Table 3:

The first seven years of the G.W. Bush presidency
increased the real deficit by slightly more than the
twelve years of the FDR administration.

If one includes fiscal year 2008-2009 as part of the G.W. Bush
administration (consistent with my treatment of all other
administrations), that administration oversaw 3.7 times as much increase
in Federal budget deficits as the FDR administration.

Obviously, many of the reasons a deficit grows or shrinks are beyond
the President's control: Congress, the economy, the beginning or ending
of a war, the beginning or ending of a recession, etc. For example, the
beginning of World War II can be blamed for
much of FDR's increase in the deficit,
just as the end of World War II and the start of the post-war economic boom
can be credited for much of Truman's matching decrease. I'm not sure
what happened to Ford: he faced an economic recession, but so have many
Presidents.

In my lifetime, every Democratic President has left office with a
smaller deficit than he inherited, and every Republican President except
Nixon has left office with a larger deficit than he inherited.
This may be because Republican Presidents have placed high priority
on cutting taxes, and placed lower priority on (or had less success at)
cutting spending. Democratic Presidents have perhaps had equal success
at cutting spending (I haven't researched those numbers),
but have not been bound by promises to cut taxes.

How much debt was accumulated over a President's term(s)?

The previous approach, looking only at starting and ending deficits,
doesn't distinguish between a President who oversees initially increasing
deficits, then decreasing at the end (like Reagan) and a President who
oversees initially decreasing deficits, then increasing at the end (like
Carter), even though the former racks up more of a debt. So I computed
the average annual deficit over a President's term(s).

Comments on Table 4:

Again, Republican Presidents seem to rack up the big debts, at least
in my lifetime (which started in 1964).
Democratic Presidents (except Obama) tend to be
"troughs" in the above graph, relative to their Republican successors
and predecessors. Before 1964, the pattern is reversed: three of the four
Democratic Presidents ran deficits over their time in office,
while three of the four Republican Presidents ran surpluses.

The first six years of B.H. Obama accrued almost as much total debt as
the eight years of G.W. Bush, which in turn was almost twice as much as
eight years of Reagan or twelve years of FDR.
The biggest accrued-debt-per-year figures are associated with B.H.
Obama, G.W. Bush, G.H.W. Bush, Ronald Reagan, FDR, Gerald Ford, Bill
Clinton, and Herbert Hoover, in that order.

How does the accumulated debt compare with what it would have been
with no change?

Since many of the items in the budget are multi-year
commitments with considerable inertia (most obviously, interest on the
national debt!), I recomputed the previous numbers,
subtracting the annual deficit in each President's first year. In
other words, this table compares how much debt was actually accumulated
with how much would have been accumulated if deficits had
continued as they were when the President took office.

Comments on Table 5:

Again, Truman is an outlier: he took office in
the middle of World War II, which immediately followed the Great
Depression. The Federal government was running an enormous annual
deficit in his first year, so it would have been remarkable if it
hadn't decreased during his term.
Likewise, Obama took office in the middle of, by far, the
biggest-deficit year in history, dealing with two wars and the most
severe recession since the 1930's; it would have been remarkable if the
deficit hadn't decreased during his term.

In the 105 years for which this Web page has adequate data,
there have been eight Democratic and nine
Republican Presidents. Five of the eight Democrats
oversaw average deficits smaller than they inherited,
while seven of the nine Republicans oversaw
average deficits larger than they inherited.